After four years of consecutive revenue growth and two transformative mergers in 2011, Weightmans is our National/Regional Firm of the Year. However, there’s no chance of any of it going to the managing partner’s head.
Weightmans’ Patrick Gaul (pictured) is as laid back and straightforward as managing partners come. In an unmistakable scouse accent reminiscent of Ringo Starr, his answers are economical and precise. He doesn’t take himself too seriously and, in a trait quite rare among managing partners, is very low on hyperbole.
When asked what has kept him in his current role for nearly a decade, his response is self-deprecating. ‘It’s not unduly onerous being the managing partner because there’s a good infrastructure here,’ he says. ‘Lots of people are doing bits of things that I unfairly take the credit for.’
A common belief is that managing partners are meant to be cheerleaders for their firms; aggressively talking up strategic plays and drawing attention to everything. But Gaul personifies his firm: over the past ten years it has quietly grown into a top 50 national player without the fanfare that you might hear elsewhere.
Weightmans and Gaul have kept their feet on the ground and allowed us to get excited for them. LB crowned the firm National/Regional Firm of the Year at the 2012 Legal Business Awards in February. The reasons why are obvious.
Pretty good year
2011 was a watershed year for Weightmans. First the firm enhanced its national infrastructure with the addition of 200 staff, which included 25 fee-earners and 13 partners, through its acquisition of Vizards Wyeth’s London insurance practice, which went live in April.
Then, following months of speculation, the firm penned a deal that saw it take over fellow North West firm Mace & Jones in May, adding 160 partners, fee-earners and support staff to the roster and significantly boosting its offering in private client, employment and disputes. It has offices in Liverpool, Manchester and Knutsford.
The added quality paid off. In the 2011 edition of The Legal 500, Weightmans was recommended in 50 categories and improved its ranking in 23 tables.
The firm had always been a solid player in its local North West market, but in the past five years it has made the difficult leap to become a national firm with top-notch healthcare and insurance practices: last year’s deals added bench strength in commercial practice areas while enhancing its status in established business lines.
Last summer it advised Cardpoint Services Limited, one of the UK’s largest independent cash machine operators, on its acquisition of OmniCash for an undisclosed sum. The firm was also shortlisted for Dispute Resolution Team of the Year at this year’s Legal Business Awards, for winning a landmark decision in the Supreme Court for London Authorities Mutual Ltd (LAML) and the London Borough of Harrow, in a groundbreaking judicial review of the viability of a mutual insurance company for local authorities. The LAML case was debated in Parliament and resulted in primary legislation changes clarifying EU procurement law.
The mergers leave Weightmans with over 1,175 staff, 148 partners and projected revenues of up to £80m in 2012, which Gaul says the firm is on target to meet.
When asked how the mergers will secure the future of the firm, Gaul is unsurprisingly mischievous. ‘That question assumes that they do!’ he says, before adding that the acquisition of Mace & Jones has doubled the firm’s commercial business while giving it credibility in work that it never had before. As for the London deal, he adds that it both strengthens the firm’s position in insurance work and adds a few new clients as well as strengthening its position with its main client Zurich.
‘Our profile in the North West has been helped enormously by the acquisition of Mace & Jones.’
Revenues with Zurich increased by 20% year-on-year, while revenues from across the firm’s top 35 clients increased by £5.5m, up 12% on 2009/10. A year ago, the firm was reappointed to Royal Mail’s legal panel while some big-name players were surplus to requirements.
In local government work, where the firm is pre-eminent, appointments to three legal panels in Wales in August mean that Weightmans now acts for a total of 11 public sector consortia across England and Wales.
Not that the firm was faring too badly before the mergers. In 2010/11, revenue was up 4% to £58m, marking a fourth consecutive year of revenue growth, and a five-year compound annual growth rate of 9%. It is the largest firm by revenue in the North peer group by some margin, with second placed Pannone posting a turnover of £47.5m. This will extend further when the firm posts its swollen revenues this year.
‘Apart from the mergers, the last few years have been about trying to make the most of business as usual,’ says Gaul. ‘I think the firm has been pretty stable through difficult market conditions.’
Speaking to LB for the LB100 report last summer, Gaul said: ‘We’re obviously very much hoping the merger investments will kick-start the business.’ Ten months into the current financial year and Gaul can now happily report positive signs.
‘I think there’s much more interest in the firm now,’ he says. ‘Our profile in the North West has been helped enormously by the acquisition of Mace & Jones. There are signs that the firm has been busy; certainly, some parts of insurance have been extremely busy. I’m hoping we’ll have significant growth in revenue – the mergers will account for some of that but I think the firm is having a growth spurt anyway.’
Margin for error
However, the financial picture is not completely rosy. More than 1,000 staff means a lot of mouths to feed and the firm’s business model means many fee-earners are charging fixed-fee or low rates. Revenue per lawyer (RPL) is low – just £145,000 – and erratic (see table, ‘Weightmans’ five-year RPL v selected competitors’, above). As Gaul says with typical candour: ‘We have around 150 paralegals and they are never going to be banging out big fees. Very little of our work is done at premium rates. Sixty per cent of our practice is insurance and apart from the professional indemnity and insurance work we do in London, it’s all relatively modestly priced.’
With a largely commoditised business and low RPL, profit is hard to come by. The profit margin is 15%; profit per lawyer is just £21,000. And for a firm where just 35 of the 148 partners are equity, profit per equity partner (PEP) is low, around £300,000 (the PEP figure of £246,000 recorded in the LB100 this year was reflective of a significant shift in equity partners between the start and end of the financial year following the mergers). That said, the equity spread across the nine-point lockstep is generous – £176,000 to £353,000 – with 13 partners at the top of the equity. But in our ‘Behind the numbers: profitability revealed’ table in the LB100 (see LB217, page 66), the firm ranked joint 89th. This puts it some way behind the firms that Gaul says are among Weightmans’ main competitors – DWF, Berrymans Lace Mawer, Hill Dickinson, DAC Beachcroft, Keoghs and Kennedys.
‘Apart from the mergers, the last few years have been about trying to make the most of business as usual.’
The margin is low compared to other firms but Gaul counters that by saying that Weightmans has plenty of well-paid fixed-share partners and that the firm’s business model precludes high profits. ‘We don’t get rate increases regularly because quite a lot of the work is fixed-fee. The mood of the market we’re in is very much about clients looking for value for money. A lot of the contracts we have are for large sums of money but for doing very large amounts of work,’ he says.
To a certain extent, this reality is reflected in the margins of some of Weightmans’ competitors: none of the insurance-based firms enjoy particularly high margins but most manage to squeeze out a higher profit per lawyer, with DAC Beachcroft posting £34,000 (see table, ‘Weightmans’ five-year PPL v selected competitors’, page 66).
Excuses aside, Gaul says that addressing profitability is a key priority for the firm going forward. Again, he is candid about its position on this. ‘We need to better understand where we make profit, so we can make more profit without ripping our clients off,’ he states simply. He believes one way of doing this is by diversifying into more lucrative areas of work but admits that this isn’t easy, because even a lot of real estate is going fixed-fee these days.
‘Some of our practice areas are £8-10m and some are £1-2m,’ he adds. ‘The ones where we have real potential for significant growth and increased market share are regulatory, professional conduct, construction and costs.’
However, he is not about to make any false promises. ‘The feeling is that increasing your profit margin at the moment is pretty tough. We’ve just undertaken a big investment in the firm and part of the rationale for that is to try and improve profit. But I wouldn’t have thought that is something that can be turned around quickly.’
Not that low profitability has been a barrier to the firm hiring in the talent it needs. Recent laterals include real estate partner Steven Silver, who joined from The Co-operative Group, where he was deputy group counsel, in March. In February the firm announced that it had hired Laurence Pritchard, a competition partner at rival DWF in Liverpool. Although the firm will continue to struggle to recruit in areas where it has little to offer, the way the firm has worked to improve its reputation and the brand over the past five years means it hasn’t been a difficult sell.
Head on
Gaul is characteristically direct on the other areas where the firm needs to improve, besides profitability, pointing out that the firm is ‘flaky on career structures’; ‘we need to be better at rewarding people who are really adding value’; and ‘there are not enough client partners thinking about what other services they could offer to clients’.
One particularly tough challenge is leveraging off the mass of commercial lawyers acquired through the mergers to build a corporate offering in the North West that can compete seriously in the next three years. Gaul says that the main local competitor is probably Brabners Chaffe Street but even benchmarking against that firm is ambitious, with Brabners having a top-tier, nine-partner corporate practice in Liverpool and regarded to be much stronger than Weightmans in Manchester.
But Weightmans knows that it has to strive for a competitive edge, after finding its own recent efforts to reach a fighting weight eclipsed by other rivals in the insurance arena. From the mega-mergers that formed Clyde & Co and DAC Beachcroft at the top end, to the takeover of Russell Jones & Walker by Slater & Gordon, and Irwin Mitchell preparing to become an alternative business structure (ABS), Weightmans finds itself at the eye of the storm.
Gaul remains phlegmatic about developments, particularly as far as ABS and taking external capital is concerned. Although the firm is keeping an eye on developments, it will not be suckered in to any lemming-like reaction. Gaul believes that until the Legal Services Act kicked off in January, many people thought that it would be a case of wait-and-see and there wouldn’t be too much activity for quite some time. Now those people are being quite surprised by the level of activity that is being mooted.
‘Some of our competitors have been saying that they will be doing big things, raising big money, which will raise the stakes in some of our markets,’ he says. ‘We have to make sure we remain competitive. To be honest though, although law firms are doing lots of things, it’s not actually clear what clients think about all this stuff. Some clients may not be happy if their providers are part-owned by someone they might not like. I think a lot of people are saying that capital is necessarily a good thing but capital can quite easily turn into debt.’
Nonetheless, he concedes that the size and shape of Weightmans will probably have to change again soon, with law firms evolving along corporate lines. The problem, he feels, is that partnerships comprise lots of owner-managers, partners who can legitimately say they own the firm. Therefore, it will need outside influence from corporates to catalyse the movement of law firms into more commercial structures.
But he remains a fan of the partnership model and warns that corporate models are not necessarily the Holy Grail. ‘My own view is that the partnership model has flexibility and that brings out the best in people who are quite clever and want to be quite creative,’ he says. ‘I slightly fear that by putting partners into corporate boxes, you might stifle the creativity. I think people are underestimating the strength of the partnership model because suddenly we can go to the market and get people to invest in us.’
Next chapter
Gaul became managing partner of Weightmans in 2003 and although he won’t take the credit for it, the firm has doubled in size during that time. He took the role because he felt he had something to offer, some ideas that could improve things in certain ways. Re-elected unopposed for a third three-year term in 2010, Gaul sums up his tenure thus: ‘The firm has done OK and no-one has come along and said: “we need to get rid of you”.’
There’s been a solid and consistent management team for quite some time at Weightmans – senior partner Ian Evans is coming up to 12 years in his post. And it’s clear that as the years have gone by, Gaul’s appetite for management has increased and he’s enjoying it more. ‘The first couple of years it was nuts and bolts stuff about how we could get the finances better but in recent years it’s been a lot more creative. That’s the really enjoyable part.’ He confesses to finding parts of the job ‘a bit boring’ – particularly budgets, business plans, management accounts each month and board minutes.
‘People are underestimating the strength of the partnership model because suddenly we can go to the market and get people to invest in us.’
‘I’m fine with the meetings, I just don’t like the minutes, the follow up actions. I just like talking to people really. I enjoy seeing things come together, seeing things succeed. Understanding the organisation, trying different things and seeing how they come off. I’m quite a good ideas person, I like seeing if my ideas will work.’
Weightmans has undoubtedly come together, particularly in the last five years. And with longevity comes experience. Gaul says that with time you get better at running a firm. Over time, you can see who will come into the organisation and work, and you get better at spotting how certain things will go down in the firm. ‘I think people recognise that and continue to trust me to do it,’ he adds.
For him, the standout achievement of his tenure is not securing the mergers, the awards or building the firm’s national reputation in core practice areas. It’s what he describes as ‘preserving the integrity and humanity of the firm’.
‘I think it’s a really good place with really good people and I think there’s a very strong culture which is fundamentally decent,’ he concludes.
All well and good but it certainly helps the culture to have commercial success underpinning it. And Weightmans has that in abundance. LB